Selling workers’ comp like it’s not a commodity

June 18, 2007

Everybody needs workers’ compensation coverage and to some that translates to a commoditization of the product line. But to be successful at selling workers’ comp, producers have to change the way they sell the product, says one industry executive.

The key to winning in workers’ compensation today means better alignment with clients on their needs, said Bill Mudge, CEO of California-based CompWest Insurance Co., a provider of workers’ compensation insurance and services to mid-size companies. Mudge delivered his comments in a presentation at the recent IBA West Blue Ribbon Conference in Hawaii in early May.

A winning close means more than just selling lower workers’ comp rates, Mudge said. To align selling strategies with the times, brokers need to really know what they’re selling, and position workers’ compensation products in a way that’s different than other producers making prospect calls, selling just on price, Mudge said. In today’s market, brokers cannot approach selling workers’ comp on merely on rates and price alone, he added.

“We need to align our strategies to what’s going on in market dynamics, and not continue to bring the same old game, the same old way; the same way we’ve done it for the last 10 or 15 years,” he said.

Mudge says the workers’ compensation industry has been commoditizing a product that’s eminently not a commodity. “In fact, it was never even designed to be a commodity and we’re teaching clients that it is a commodity by our sales approaches. … The system’s not designed to commoditize, it’s designed to differentiate. And yet we commoditize it in our sales process every day.”

Quit talking about rates, and start talking about total cost for a client, he says.

If brokers want to have stronger value proposition as sales people, they have to stop talking about price, Mudge advises. “We’ve got to get back to the things that really add value — strategies to control full cost,” he said.

Be an insurance advisor

To align selling strategies for workers’ compensation insurance with today’s times, agents and brokers need to move away from marketing and get back to the business of advising, Mudge cautioned.

“There are clients out there that are just dying to have a little bit more of your time,” Mudge said, “to be educated on things that really do matter to them, as opposed to just chasing rates.”

Mudge says a common question he encounters from business owners and chief financial officers making decisions on workers’ compensation insurance is, “what should I ask?” No one ever tells them what they should ask a provider of workers’ comp when evaluating a new market, he said. “They want to know this stuff.”

So the first thing brokers should ask prospective clients is: how do they want to treat their employees? What do they want to do, and how does that fit with the way they want to run their business? Mudge asked. “That gets lots of sales opportunities to a smart producer.”

Next, Mudge might ask a prospective insured to really think about who they want as their advisor. “I don’t say broker. I don’t say agent. I say advisor,” Mudge said. “Just like the advisors you have in other areas of your business; you need a professional advisor to help you integrate and align what you want to accomplish with your employees.”

Next, Mudge might ask a prospective insured to think about what they want from their workers’ compensation carrier. “Because we’re not all the same,” he noted. “It isn’t buying it off a spreadsheet. It isn’t just picking a rate and carrier, and hoping it’s all the same.”

And lastly, Mudge might ask a prospective insured to think about what they want to do to control costs. “Nobody controls this flat rate and workers’ comp policy on any given day,” he said. “But with a professional advisor and companies that believe in this kind of stuff, (businesses) can take control of (their) destiny.”

Aligning what the employer really wants to accomplish, with the right advisor and the right insurance company, delivers the best economic outcome, Mudge said.

“You’ve got to focus on the people in the middle, not focus on your own agenda,” Mudge said. “That doesn’t have anything to do with price and rates, but it has everything to do with trying to take control of their own investment.”

A good time to sell

“It’s a good time to sell workers’ comp if you’re a broker,” Mudge says. Workers’ compensation represents 20 percent to 30 percent of the revenue base of most brokerage firms, he notes. In many cases, rates are down and commission levels have improved, he adds.

Today’s workers’ compensation market calls for producers to have the best carriers involved, he added.

“You’ve got to get your best carriers involved,” he said. “You can’t possibly know everything that’s going on in every market out there, so you’ve got to pick your partners and get them involved in helping you make sales.”

Mudge also says that workers’ compensation carriers should provide their producers with demographical information. “If you’re not getting demographic information from them, ask for it. If you’re not getting pre-qualified leads … you should be asking for them. If they’re not helping educate your young producers about how to sell in today’s world, you should be asking for that. And if you can’t get access to the CEO of a company or key decision-makers, you ought to be asking them for that too.”

If producers are to overcome the buyer apathy that’s out there, their selling strategies have to change, he said. “You can’t plan on being the same. We’ve got to change it,” he said. Think twice before leading with price, he cautioned, because everybody leads with price. And producers can’t win on price alone, he added.

In today’s market, producers can differentiate themselves, he says. “You can differentiate what you’re offering. You can grow in workers’ comp. It’s a good time to sell.”

Remember, Mudge cautioned, “If you’re not out there selling it, somebody else is.”

From This Issue

Insurance Journal West June 18, 2007
June 18, 2007
Insurance Journal West Magazine

Workers’ Compensation Directory; Agency Options: Networks, Financing, Planning; Corporate Profiles

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